Jpc Summons Cse Officials

The Joint Parliamentary Committee (JPC) probing the recent stock market crisis has summoned Calcutta Stock Exchange (CSE) officials to depose before it on June 26. The CSE officials were summoned by the JPC for the first time on June 13, but did not have to take the hot seat.

The Securities and Exchange Board of India (Sebi) in its interim report to the JPC, has cited a number of irregularities at the bourse, and illustrated the link between Ketan Parekh and the defaulters of CSE.

The market regulator has pointed out that the bourse was not collecting margins from brokers properly, and was allowing certain members to exceed the threshold limit of Rs 5 crore on carry forward of each scrip.

However, the Sebi report is unusually silent on the role of unauthorised carry forward of trades, or badla financing, though it was largely responsible for the extra-ordinary build-up of open positions.

The Sebi report also does not mention the bug in the software used by the exchange to calculate gross exposure margin of the members. Top-level officials of the exchange have said that the bug existed since February 2000, and was systematically abused by a section of brokers to avoid margin payment.

The allegation that the exchange was not collecting margins properly is proved by the fact that when the exchange was hit by a default of Rs 120 crore, it managed to collect no more than Rs 24 crore from margin deposits of the defaulting brokers, when normally 30-35 per cent of the risk to the exchange is supposed to be covered by margins.

The exchange, however, has not been able to produce its final report on the crisis thus far, though it has been discussed at CSE board meetings a number of times. It has submitted a preliminary report to the Sebi, but that contains little more than a settlement by settlement narration of the crisis.